QLogic Reports First Quarter Results for Fiscal Year 2016

Non-GAAP Financial Measures

The non-GAAP financial measures contained herein are a supplement to the corresponding financial measures prepared in accordance with generally accepted accounting principles (GAAP). The non-GAAP financial measures presented exclude the items summarized in the above table. Management believes that adjustments for these items assist investors in making comparisons of period-to-period operating results and that these items are not indicative of the company’s on-going core operating performance.

The company has presented non-GAAP net income and non-GAAP net income per diluted share, on a basis consistent with its historical presentation, to assist investors in understanding the company’s core net income and core net income per diluted share on an on-going basis. These non-GAAP financial measures may also assist investors in making comparisons of the company’s core net profitability with historical periods and comparisons of the company’s core net profitability with the corresponding results for competitors. Management believes that non-GAAP net income and non-GAAP net income per diluted share are important measures in the evaluation of the company’s profitability. These non-GAAP financial measures exclude the adjustments described in the above table, and thus provide an overall measure of the company’s on-going net profitability and related profitability on a per diluted share basis.

Management uses non-GAAP net income and non-GAAP net income per diluted share in its evaluation of the company’s core after-tax results of operations and trends between fiscal periods and believes that these measures are important components of its internal performance measurement process. In addition, the company prepares and maintains its budgets and forecasts for future periods on a basis consistent with these non-GAAP financial measures. Management believes that providing these non-GAAP financial measures allows investors to view the company’s financial results in the way that management views the financial results.

The non-GAAP financial measures presented herein have certain limitations in that they do not reflect all of the costs associated with the operations of the company’s business as determined in accordance with GAAP. Therefore, investors should consider non-GAAP financial measures in addition to, and not as a substitute for, or as superior to, measures of financial performance prepared in accordance with GAAP. The non-GAAP financial measures presented by the company may be different from the non-GAAP financial measures used by other companies.

For additional information on the items excluded from the non-GAAP financial measures and why the company believes that these non-GAAP financial measures provide useful supplemental information to investors, the company refers you to the Form 8-K regarding this release filed today with the Securities and Exchange Commission.

A summary of the non-GAAP adjustments presented in the table above by the financial statement line impacted is as follows:

(unaudited – in thousands)       Three Months Ended
June 28,

2015

                June 29,

2014

Non-GAAP Adjustments:
Cost of revenues:
Stock-based compensation $ 250 $ 355
Amortization of acquisition-related intangible assets 3,467 4,448
Amortization of license fee 617 699
Acquisition-related charges     771  
Total cost of revenue adjustments   4,334   6,273  
 
Operating expenses:
Engineering and development:
Stock-based compensation 3,274 2,971
Sales and marketing:
Stock-based compensation 1,201 1,010
Amortization of acquisition-related intangible assets 169
General and administrative:
Stock-based compensation 1,262 1,204
Special charges   1,079   2,544  
Total operating expense adjustments   6,985   7,729  
 
Total non-GAAP adjustments before income taxes 11,319 14,002
 
Income tax adjustments   2,642   (1,516 )
 
Total non-GAAP adjustments $ 13,961 $ 12,486  
 
 
                     

QLOGIC CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited — in thousands)

 
June 28,

2015

March 29,

2015

ASSETS
Current assets:
Cash and cash equivalents $ 92,199 $ 115,241
Marketable securities   216,676     201,174  
Total cash and marketable securities 308,875 316,415
Accounts receivable, net 84,951 87,436
Inventories 38,649 29,978
Deferred tax assets 12,146 12,545
Other current assets   23,020     21,802  
Total current assets 467,641 468,176
 
Property and equipment, net 79,013 78,501
Goodwill 167,232 167,232
Purchased intangible assets, net 73,974 77,659
Deferred tax assets 33,412 36,335
Other assets   20,757     20,752  
 
$ 842,029   $ 848,655  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 39,263 $ 40,497
Accrued compensation 17,563 22,476
Accrued taxes 1,753 2,711
Other current liabilities   11,629     11,718  
Total current liabilities 70,208 77,402
 
Accrued taxes 14,753 14,516
Other liabilities   7,792     9,721  
Total liabilities   92,753     101,639  
 
Stockholders’ equity:
Common stock 217 215
Additional paid-in capital 1,000,999 983,579
Retained earnings 1,725,220 1,722,664
Accumulated other comprehensive loss (412 ) (99 )
Treasury stock   (1,976,748 )   (1,959,343 )
Total stockholders’ equity   749,276     747,016  
 
$ 842,029   $ 848,655  
 
 
     

QLOGIC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited — in thousands)

 
Three Months Ended

 

June 28,

2015

                June 29,

2014

 
Cash flows from operating activities:
Net income $ 2,556 $ 6,000
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization 10,616 12,180
Stock-based compensation 5,987 5,540
Deferred income taxes 3,400 4,076
Asset impairments 1,011
Other non-cash items 539 581
Changes in operating assets and liabilities:
Accounts receivable 2,517 (18,880 )
Inventories (8,671 ) (7,679 )
Other assets (134 ) 77
Accounts payable 2,218 416
Accrued compensation (4,913 ) (7,235 )
Accrued taxes, net (3,081 ) (5,418 )
Other liabilities   (1,567 )   (7,291 )
Net cash provided by (used in) operating activities   9,467     (16,622 )
 
Cash flows from investing activities:
Purchases of available-for-sale securities (50,639 ) (51,759 )
Proceeds from sales and maturities of available-for-sale securities 34,209 48,932
Purchases of property and equipment   (10,782 )   (8,989 )
Net cash used in investing activities   (27,212 )   (11,816 )
 
Cash flows from financing activities:
Proceeds from issuance of common stock under stock-based awards 16,497 1,440
Minimum tax withholding paid on behalf of employees for restricted stock units (5,062 ) (3,298 )
Purchases of treasury stock (17,856 )
Other financing activities   1,124     (80 )
Net cash used in financing activities   (5,297 )   (1,938 )
 
Net decrease in cash and cash equivalents (23,042 ) (30,376 )
 
Cash and cash equivalents at beginning of period   115,241     91,258  
 
Cash and cash equivalents at end of period $ 92,199   $ 60,882  
 
 
     

QLOGIC CORPORATION

SUPPLEMENTAL FINANCIAL INFORMATION

(unaudited — in thousands)

 

Net Revenues

 

A summary of the company’s revenue components is as follows:

 
Three Months Ended
June 28,

2015

                June 29,

2014

Advanced Connectivity Platforms $ 102,556 $ 104,701
Legacy Connectivity Products   10,849   14,748
$ 113,405 $ 119,449
 

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